Salaam Gateway

Islamic finance to show low to mid single-digit growth in 2020-2021: S&P

According to S&P Global Ratings, the global Islamic finance industry will show low-to-mid single-digit growth in 2020-2021 after 11.4% in 2019. The COVID-19 pandemic will halt growth at GCC Islamic and conventional banks in 2020 as they focus on preserving asset quality rather than business expansion. Shariah-compliant banks are likely to see a greater effect on asset quality indicators since they typically have a higher proportion of exposure to real estate and cannot charge late payment fees. S&P projects the volume of sukuk issuance will reach $100 billion in 2020 compared with $162 billion in 2019. Corporates will also not support a rise in sukuk this year as they hold on to cash, cut capital expenditure and turn to bank financing.

#Russia’s Sberbank to set up office in Abu Dhabi, exploring opportunities with Mubadala including in Islamic finance

Russian state-owned Sberbank will establish a presence in Abu Dhabi by the end of the year. Sberbank has also signed an agreement with Abu Dhabi sovereign investor Mubadala Investment Company. The agreement covers cooperation in areas including co-investments, debt and equity financing, long-term financing of Mubadala projects in Russia and other territories. It also includes the potential cooperation and investments in a broad range of areas including Islamic finance, artificial intelligence, cybersecurity, life sciences, venture capital, telemedicine and education. The bank is new to Islamic finance. In August it announced that it had structured a trade finance deal, its first-ever, with the International Islamic Trade Finance Corporation (ITFC).

Saudi Re receives Sharia certification from Shariyah Review Bureau

Saudi Reinsurance Company (Saudi Re) announced receiving the Sharia certificate for its offerings from Shariyah Review Bureau (SRB). With a solid financial base of total assets SAR 2.9 billion and an A3 rating by Moody's, Saudi Re is eyeing opportunities to strengthen its presence in its target markets in the Kingdom, the Middle East, Asia and Africa. CEO Fahad Al-Hesni said that Saudi Re has identified Environmental, Social and Governance (ESG) objectives from investors perspective, among which Sharia compliance was emphasized as a key factor in reflecting the responsible conduct. SRB apply various Sharia supervisory actions like reviews, investment screening, interactive consultations, Sharia Board administration and periodic Sharia audits.

International Islamic Trade Finance Corporation and Mizuho Bank Malaysia sign $100 mln trade financing deal

The International Islamic Trade Finance Corporation (ITFC) signed a US$100 million Murabaha-structured line of trade finance with Mizuho Bank Malaysia, a subsidiary of Mizuho Bank Japan. This financing will help ITFC extend its support to the member countries under its COVID-19 Response Plan. The financing is ITFC’s first partnership with a Japanese bank, signalling an expansion of its partners around the world. The virtual signing ceremony took place between Eng. Hani Salem Sonbol, CEO ITFC and Mr. Shojiro Mizoguchi, the Managing Director & CEO, Mizuho Bank (Malaysia) and witnessed by Mr. Hidekatsu Take, the Managing Executive Officer of Mizuho Bank.

Nigerian Islamic bank Jaiz targets N5.41b gross income in Q4

Jaiz Bank has projected that the flagship non-interest bank will post a gross income of N5.41 billion in the fourth quarter with average pre-tax profit per average sales expected at 13.03%. The bank predicted that profit before tax will be N705.37 million while profit after tax is expected to close the three-month period at N634.83 million. Jaiz Bank Managing Director Hassan Usman said overall vision of the bank was to become the leading non-interest financial institution in Sub-Saharan Africa. The bank wants to develop small and medium enterprises (SMEs), grow with them and support them not only for profit making but to ensure the country achieves real growth. He noted that while the bank would continue to expand its operations across the country by opening more branches, it will significantly leverage on technology and bring the semi-banked and unbanked population into the formal economy.

Shariah-compliant businesses shown to rate more highly in ESG than conventional firms

According to a recent analysis by asset management firm Arabesque, Shariah-compliant companies scored better than the overall group in 19 out of 22 environmental, social and corporate governance (ESG) categories. For the vast majority of 22 business topics, Shariah-compliant companies outperform the wider dataset, and most strongly in the areas of labour rights, human rights, environmental management and water use. One of the most recent companies to adopt the AAOIFI Code of Ethics for Islamic Finance Professionals is Ethis Global, which believes it is the first Islamic fintech to do so. The Malaysian social crowdfunding platform is also a signatory to the the United Nations Global Compact (GC).

With building blocks in place, #Malaysia says it’s ready to welcome Islamic fintech investors

The Islamic fintech space is growing in Malaysia, with recent entrants and an expanding consumer base. Government support and related initiatives are helping to drive the sector’s development. There are currently some 26 Islamic fintechs operating out of the country. While Malaysians have the possibility to bank in a Shariah-compliant manner, Islamic fintech has not yet reflected the same range of services that conventional fintech has offered, particularly in North America, Europe and China. Such gaps in the market have yet to be tapped, but there is a ready market for such services. A new digital bank could drive sectoral development, with Bank Negara Malaysia granting five licenses, with one potentially an Islamic provider.

Amanie Shariah supervisory board endorses Walton’s land investment product as Shariah-compliant

The Walton Group's Exit-Focused Land investment has been endorsed by the Amanie Shariah Supervisory Board as a Shariah-compliant investment product. Walton’s exit-focused pre-development land investment provides an innovative solution to U.S. public homebuilders as they move to streamline and optimize their land inventory pipelines. Walton is a privately owned, leading global real estate investment, land asset management and administration company that has focused on strategically located land in major growth corridors for 40-plus years. The company manages and administers US$3.39 billion of real estate assets in North America. Walton has more than 104,000 acres of land under ownership, management and administration in the United States and Canada.

Indonesian personal finance portal Finansialku eyeing more investors with new Islamic feature

Indonesian personal finance assistant PT Solusi Finansialku plans to launch a dedicated Islamic feature to capture a broader base of investors. Finansialku currently has more than six certified financial planners focused on Shariah-compliant investing but lacks a dedicated Islamic section on its app and platform. Its app has been downloaded 203,000 times since April 2017 and it is targeting 4 million downloads by 2022. Finansialku started in 2013 and only digitalised in 2016, moving its services online and to an app. Its advisors are CFPs certified by the national authority the Financial Planning Standards Board (FPSB).

Dubai lifts veil on debt, showing it owes much less than thought

Dubai made a rare foray into public bond markets, revealing that its debt burden is now a lot smaller than estimated by analysts only months ago. The emirate’s outstanding direct debt stood at 123.5 billion dirhams ($33.6 billion) as of June 30. That’s about 28% of last year’s gross domestic product. Dubai's economy is heavily dependent on tourism, trade and retail, sectors hardest hit by the emergency. The global pandemic forced Dubai to delay this year’s World Expo. The government revised this year’s budget revenue to 44.2 billion dirhams down more than 30% from what it originally envisaged. It also decreased its projected expenditure to 56.2 billion dirhams for 2020, leaving a deficit of 11.9 billion dirhams. Dubai owes a total of $20 billion to the Abu Dhabi government and the UAE central bank, an amount it used to support strategic entities that required financial assistance.

#UK gets its first Islamic P2P crowdfunder for SMEs

A new UK-based Shariah-compliant crowdfunding platform providing business financing to small and medium sized enterprises (SMEs) launched at the end of June. Qardus is an appointed representative of Share In Ltd. According to founder Hassan Daher, Qardus is a peer-to-peer platform for everyone, whether Muslim or non-Muslim, open to investors seeking to generate superior returns as well as having a social impact. Qardus connects SMEs and investors. The platform offers the unsecured financing for a period of up to two years in the form of commodity murabahah. The minimum investment size is £100 and investors can expect over 10% return per annum but capital is at risk. Looking ahead, Qardus plans to offer more than peer-to-peer lending. It will look to raise £1.5 million by the end of this year and may consider VC funding or equity crowdfunding.

NBB diversifies its Murabaha service to clients by offering #Sukuk-based #Murabaha facility

The National Bank of Bahrain (NBB) announced its subscription to Bahrain Bourse’s newly introduced Murabaha service, which will be used by the Bank when transacting in Islamic Commodity Murabaha financing. NBB is one of the first banks in the Kingdom to execute a transaction using the new fully Shari’ah compliant service. The service employs Government of Bahrain Islamic Ijara Sukuk, whereby the lender in the financing transaction buys the Sukuk from the CBB and after the transfer of the ownership, sells them to the borrower, with a deferred sell as the underlying commodity.

New #UK waqf fund to start investing in real estate with eye on other asset classes

The recently established UK-based National Waqf Fund (NWF) will start investing in real estate, according to CEO and co-founder Umer Suleman. NWF will be focused on the charity and social aspects of waqf. The three main aims of NWF are to establish a central fund, manage awqaf on behalf of other organisations as well as create a virtual centre of excellence for Islamic endowments. NWF will invest in real estate and through its investment committee decide on how and where to deploy the funds. Suleman noted that the upcoming property portfolio will primarily focus on London, Birmingham and Manchester, without the exclusion of other areas. NWF aims to raise £10 million ($12.37 million) within the next 1 to 2 years. Within the next decade, Suleman hopes NWF will have around £150 million of assets under management.

#Indonesia issues $2.5 bln global #sukuk including $750 mln green tranche

The government of Indonesia issued $2.5 billion in wakalah global sukuk in three tranches. The 5-year paper of $750 million was sold as a green sukuk, while the other two tranches consisted of a 10-year tenor of $1 billion, and a 30-year maturity of $750 million. The sale was welcomed by investors with an order book that reached $16.66 billion, nearly 6.7 times the target amount. This global sukuk will be listed on the Singapore Stock Exchange and NASDAQ Dubai and the settlement will be carried out on June 23, 2020, with yields of 2.30% for the 5-year tenor, 2.80% for the 10-year tenor and 3.80% for the 30-year tenor.

‘It’s beyond our dreams to have Islamic banks all over the world’ – Shaikh Saleh Kamel, 1941 – May 18, 2020

Shaikh Saleh Kamel, founder of Al Baraka Banking Group, passed away on May 18. He was one of the pioneers of Islamic banking, having set up one of the first of the modern-day Shariah-compliant banks in the late 1970s that became the Al Baraka Banking Group today. Shaikh Saleh was also President of the Islamic Chamber of Commerce, Industry and Agriculture, the Jeddah Chamber of Commerce and Industry, and he served as the Chair of the General Council for Islamic Banks and Financial Institutions. Shaikh Saleh said his satellite and internet channel, which he opened in 1998 and that largely presents religious content, was one of the things in his life he was most proud of.

#Indonesia government partners with biggest Islamic organization to set up 10,000 grocery stores

Indonesia’s Ministry for Economic Affairs is teaming up with the country’s largest Islamic organization Nahdlatul Ulama (NU) to set up 10,000 grocery stores in the next 4 years. The ministry’s vice deputy Gede Edy Prasetya estimates that it will cost around 40 million rupiah to establish a new grocery store under the new partnership. Amid the COVID-19 outbreak this year, the government is seeking new potential eligible beneficiaries for its micro credit schemes. This year, it aims to disburse 190 trillion rupiah ($13.6 billion) as part of the scheme. It has already disbursed 34.2 trillion rupiah in loans as at the end of April, with a non-performing loan rate of 1.23%.

#Indonesia’s BNI Syariah to expand international banking services

Indonesia’s state-owned BNI Syariah plans to add overseas representative offices to run trade finance, and financial institutions and remittance services. The Islamic bank will leverage the branch offices of its parent company, Bank Negara Indonesia, in Singapore, Tokyo, Seoul, Hong Kong, London and New York. The bank can now expand its international banking services after it received a non-cash capital injection of 255 billion rupiah ($17.5 million) in March. This moved it up to Tier 3, for banks holding core capital of 5 trillion rupiah (around $342.5 million) to 30 trillion rupiah. The lender is also eyeing markets outside its current geographies, such as Malaysia, Saudi Arabia and Taiwan. Alongside expanding its international presence, the bank is mitigating downside risks by optimizing its digital banking channels.

With Islamic social finance increasingly responding to global humanitarian efforts, Muslim donors explain why they choose to give to refugees

There’s an increasing awareness of the significance of Islamic social finance and philanthropy with more organizations reaching out to potential donors. In the Middle East, three donors explain why they choose to give to refugees through the United Nations’ Refugee Agency, UNHCR’s Refugee Zakat Fund. The most important reasons for them are how widely the organization distributes aid and how transparent and honest it is. Houssam Chahine, UNHCR's regional head of private sector partnerships, says the need for Zakat and Sadaqah for refugees this year is even greater. He is confident that the Fund can raise more donations this year in support of vulnerable refugee families, because challenging times persuade people to find ways to give more.

BIBF and UK firm Cogneum developing platform to converge Shariah governance and UN SDGs

The Bahrain Institute of Banking and Finance (BIBF) is working with UK-based developer Cogneum on a Shariah governance software platform. The cloud-based platform is meant to allow Islamic banks and financial institutions to streamline their internal Shariah governance processes, facilitate the integration of Maqasid al Shariah and the UN SDGs in their workflow. The software will help reduce charitable write-offs by Islamic banks due to Shariah non-compliance issues. The partners will initially target the platform for retail Islamic banks. BIBF director Mujtaba Khalid said the Shariah governance framework of the software solution will be based on AAOIFI Standards but can also be customized as per the banks’ Shariah governance manual. He added that the platform can also help organisations in the areas of green bonds, sukuk and sustainability risk reporting.

South Africa working on rand-denominated #sukuk issue

The Republic of South Africa is working on a rand-denominated sukuk for the financial year 2020/2021. Details regarding the size, tenor and structure of the Shariah-compliant notes will be made in due course. The government may also consider issuing a second sovereign U.S. dollar sukuk in the long term. South Africa issued its first-ever international sovereign sukuk in 2014. The deal consisted of a $500 million 5.75-year note, offering a profit rate of 3.90%.

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